Economic Data and Market Highlights
This past week, the first week of the second quarter, was an abbreviated trading week for most markets outside of the United States with exchanges closed for the Easter holiday. Global equity markets trended lower with the MSCI All Country World Index (ACWI) falling 88 basis points. Developed markets in general declined as the S&P 500 fell 93 basis points while the MSCI EAFE dropped 1.34% with Japan, the largest contributor, falling 2.62%. Emerging markets rose 28 basis points as Chinese equities jumped 70 basis points and Indian equities advanced 1.6% in US dollar terms according to MSCI. Global bond markets also dropped 68 basis points.
Friday’s US nonfarm payrolls came in at 303,000, well over analyst expectations of 200,000. This is the largest monthly jump in the metric since early 2023. Meanwhile US unemployment fell to 3.8% and stayed below 4% for the 26th month in a row which is the longest stretch since 1960. The previous day, Federal Reserve Bank of Minneapolis President, Neel Kashkari suggested rate cuts may not occur in 2024 if inflation does not decline further.
US Consumer borrowing climbed in February driven by the largest increase in credit card balances in 3 months. Total credit rose to $14.1B after a revised $17.7B gain in January, while revolving credit climbed $11.3B in February. According to the Federal Reserve, the average credit card interest rate is now 22.63%, while prior to the pandemic it was under 17%. Total credit expanded by 3.4% annually in February after increasing by 4.2% the prior month.
Despite the 4.8 earthquake hitting New Jersey on Friday, making news locally, Taiwan had its biggest earthquake in nearly 25 years. Taiwan Semiconductor Manufacturing Co. supplies chips to Apple and Nvidia and is a major part of the global supply chain for semiconductors. Initial reports from Taiwan Semiconductor Manufacturing Co. stated only a small number of tools were damaged at certain facilities partially impacting operations.
US office vacancy rates reached a new high, 19.8%, in Q1 2024 per data from Moody’s. Effective rents declined 0.04% in the first quarter even though asking rents increased 0.14%. Tenants seem to be leveraging the current vacancies to secure better deals.
S&P Global reported that public-to-private deals hit a high not seen in 16 years last year as 96 firms exited the public market totaling $118 billion. Many were distress situations coupled with the dislocation in the stock market. Private equity firms jumped on the opportunity to buy at lower valuations and corporations were more restrained from acquiring firms due to downward pressure on their own stock prices, stricter M&A regulatory framework, inflation, and recession fears. Four of the largest deals over the last five years were in the software sector where companies tend to use less leverage.
The Past Week’s notable US data points
Data Source: Bloomberg, Charles Schwab, CNBC, Goldman Sachs, J.P. Morgan, Morningstar, Morgan Stanley, Standard & Poor’s, and the Wall Street Journal.
Authors:
Jon Chesshire, Managing Director, Head of Research
Michael McNamara, Analyst
Sam Morris, Analyst